Financial Crises
Anatomy lesson

Do the 1930s, the last period of major international financial crisis, contain lessons for the 1980s? In Discussion Paper No. 130, Research Fellow Barry Eichengreen and CEPR Director Richard Portes analyse the generation and propagation of financial crises in an international setting. They provide the first detailed and structured comparative analysis of the international financial system in the 1920s-30s and 1970s-80s.

Eichengreen and Portes's analysis highlights the operation of three sets of linkages; from debt defaults to bank failures; from exchange-market disturbances to debt defaults; and from exchange- market disturbances to bank failures. In both periods institutional arrangements in financial markets affected the operation of these linkages and played a critical role in determining the system's vulnerability to destabilizing shocks the authors argue.

Eichengreen and Portes discussed their comparative analysis of the 1930s and 1980s at a recent lunchtime meeting, a full report of which appears in this Bulletin.

The Anatomy of Financial Crises
Barry Eichengreen and Richard Portes

Discussion Paper No. 130, September 1986 (IM)